On 11 March 2020, the new Chancellor of the Exchequer delivered his first Budget, setting out the government’s tax and spending plans for the year ahead.
Here, experts from our corporate and commercial, and residential conveyancing teams share their thoughts on how the Budget will impact business owners and home buyers.
Commenting on the changes to Entrepreneurs’ Relief, Thomas Newlyn from our corporate and commercial team says:
“Whilst the Chancellor of the Exchequer, Rishi Sunak’s, announcement of a £30 billion investment to combat the coronavirus outbreak was arguably the most eye-opening announcement in the Budget, given the current climate, there were a number of key points business owners must also take away from it.
“The Bank of England had earlier announced the reduction of the base rate from 0.75% to 0.25%, an emergency procedure to help stabilise the economy in response to the coronavirus outbreak. In particular, this will assist smaller to medium-sized businesses which are more likely to be financially impacted by the coronavirus outbreak as business demand may suffer rendering trade more difficult and there may also be staff absences.
“From a business perspective, one of the most eagerly anticipated announcements in the Budget was the Government’s position regarding Entrepreneurs’ Relief. Mr Sunak described Entrepreneurs’ Relief as ‘expensive, ineffective and unfair’ with three quarters of the relief going to merely five thousand people. As a consequence, Entrepreneurs’ Relief is to be scaled back from a £10 million lifetime allowance to a £1 million lifetime allowance.
“Entrepreneurs’ Relief allows business owners of two years or more to pay less capital gains tax when the business is sold. Mr Sunak’s announcement heavily impacts business owners who sell or dispose of part of their business during their lifetime and who will now pay 10% tax on all gains up until £1 million instead of £10 million, after which the standard capital gains tax rates apply.
“Despite the reduction, Mr Sunak stressed that he is keen to encourage risk-taking and creativity in the UK and the Government’s challenge will be to discover new methods to incentivise entrepreneurship. However, slashing the lifetime allowance from £10m to £1m is likely to dampen M&A activity in the market once the changes take effect.”
Commenting on how the budget affects the UK housing industry, Claire Josef from our residential conveyancing team says:
“The Budget sets out an ambitious package of investment to build the high quality and affordable homes the country needs. Great news for first time buyers and buyers looking to purchase affordable houses. Once built; this will mean a greater availability of much needed housing in the UK.
“The government has also announced plans to invest an additional £1 billion to remove unsafe cladding from residential buildings above 18 metres to ensure people feel safe in their homes.
“Since the Grenfell disaster this has been a much needed area of reform. This will provide comfort to residents in blocks; to enable them to feel safer in their homes.
“The introduction of a 2% SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland from 1 April 2021 is welcome as it will help to control house price inflation and to support UK residents to get onto and move up the housing ladder. The money raised from the surcharge will be used to help address rough sleeping, which is a really positive step.”